Iron Ore Market Update
Market Commentary
Iron ore futures surged past $230 in one of its most volatile days to date amid a broadening commodities boom. Industrial commodities and shipping costs are spiking as buyers hurry to secure raw materials with global industries from manufacturing to construction all gearing up again as the pandemic fades. Meanwhile, steelmakers in China have been ramping up production despite government attempts to rein in output, while robust mills’ profitability have enabled mills to better accommodate soaring raw material costs. “Logic dictates that these are ridiculous prices, but fear will continue to keep the scramble going,” said Glass, founder of Singapore-based Avatar Commodities said. “There is fear of not being able to secure the logistics and the resources you need — $220 is expensive, but it’s much more expensive if you have to shut down a mill because you can’t get material.” Some analysts however warned of the risks of the surging prices. “Although it’s still a bull market, the rapid price sure in the short-term has accumulated risks and there’s possibility for adjustment,” analysts with SInoSteel Futures wrote in a note. In response to the rising risks, the Dalian Commodity Exchange (DCE) proposed to lower standard iron content requirements in ore delivered against its flagship futures to 61%, seeking to broaden supply sources to include lower grades amid a record-setting rally of the steelmaking material.
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